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Sunday, 1 March 2009

Why Zambia’s Economic Development Pace is Too Slow: A Rebuttal (Guest Blog - KBM)

Chrispin Ntungo recently made an interesting observation that – failure to decentralize Zambia's political and government structures is the root cause of the slow pace in economic development. He argues that the collapse of copper prices, if any, plays only a minor role.

He builds his thesis on the assumption that – given the empowerment of local authorities at provincial and municipal levels to make 'economic' decisions, with ability to raise revenue – the economy would have taken off. Creating what he calls "provincial economies" would have played the trick. Never mind lack of resources in these provinces.

To a certain extent that sounds plausible. And I guess there are some like Edith Nawakwi who would totally agree with Ntungo. But I would counter argue by saying that – the main reason, if I was to pick only one – is our failure to diversify the economy away from reliance on copper. In boom times we only concentrated on consuming and not expanding our economic base.

You can legislate to decentralize power from Lusaka to provincial capitals, but so long as these regional centers lack what I call 'economic center pieces or clusters', nothing would happen. Unless each province had economic brain centers like Nakambala in Mazabuka, or Sun Hotel in Livingstone – they would have no source of income or economic activities to tax.

In other words, although we know that Northern Province has the potential to grow more beans, catch more fish or attract more tourists – you need to start by developing its infrastructure. If you want to encourage more beans farmers in Kaputa district or more fishermen in Chambeshi, you need better feeder roads. Just as a pot-holed road to Shiwa Ng'andu or lack of or poor Chalets at Kasaba Bay, would not attract tourists from America.

Therefore, you have to ask yourself a critical question. Which one do we need most in provinces – a powerful Governor or developed economic infrastructures? The answer is quite obvious. Ntungo recognizes KK's attempts during the first decade after independence to invest in public goods like hospitals, schools, colleges etc. But he shies away to say that - this agenda should have been expanded towards minimizing our reliance on copper earnings.

Diversifying away from copper, should have meant only one thing – finding and developing other forms of earning foreign exchange. We didn't. Yet Zambia has got good soils and only twenty percent of its arable land is being used. Moreover we have an army of strong young men and women, who can be put to good use in developing agriculture. Not even to mention that Victoria Falls is one of the wonders of the world. Kenya earns huge bucks from Mt Kilimanjaro which does not even belong to Kenya.

These and others are the areas we've failed to jack up. Zambians, with a mining mentality, have failed to seriously imagine the day of reckoning – when copper could be completely exhausted or become obsolete in stroke. With an invention of a new technology to replace copper, we would be forced to eat our own copper. Thus, this discussion raised by Ntungo, is a matter of life and death.

Therefore, credit should be given to Chrispin Ntungo for bringing up this matter in an open debate. And Kudos are awarded for pointing out that our system has been feeding on itself since independence.

I fully concur with him when he criticizes the structure – where holding major positions or access to opportunities depends purely on loyalty to the party and president. Not only that this is nepotistic, having leaders incapable of making 'economic decisions', is very bad. Rewarding resources or promotions only to those who can obey cannot be competitive with the rest of the world. We would always be lagging behind and be dependant.

My disagreement however – is that, decentralization does not hold the magic key to untangle the slow economic development in Zambia. Also, his position on the role of the Diaspora in economic development is different from mine.

Ntungo doubts if repatriation of the brains in the Diaspora would have any impact on accelerating economic development. He argues that since those "PhDs" already at home are constrained by the 'inflexible structure', it would make no difference at all. That I quote, "Zambia's brainy professionals would only find positions on decision making tables at provincial and municipal government levels". I disagree.

There is or should be at least one significant difference between "stayee professionals" and those "in Diaspora". Those at home have already been incorporated (bribed by rewards and favors) into the bad system Ntungo heavily criticizes, while those abroad are not. Those abroad would return primarily on their terms. So they would have a free hand in taking decisions.

You may say that, after all even those at home have been abroad before. Yes, those at home went back and embraced a corrupt system. Anyone who stayed abroad for at least five years after 1991 when multiparty democracy was re-introduced has seen how, due to self-interest, the brainy professionals made a fool of themselves.

If a 'decision to leave Zambia…is a decision to run away from poverty', as Ntungo observes, a decision to return back must be a decision to go and assist in eradicating poverty. Otherwise why bother? Therefore in some sense, we are partly to blame for this anomaly wherever we happen to be – home or overseas.

Take for example, instead of guiding or opposing Fredrick Chiluba's escapes, educated professionals embraced them. Consequently things went hay-wires in Zambia. Had these supposedly well informed people reacted the way they ought to have – going back to the same old structure of centralized government would have been avoided. The Katele Kalumbas, Patrick Machungwa, Donald Chanda, Ernest Sakala and many more, let us down. In short, they joined the club and became accomplices. Corruptions became cancerous.

Given a chance to lead that country, I don't think that people like Prof Muna Ndulo, Michelo Hansungule, Clive Chirwa, Chisanga Puta-Chekwe and others who have resided abroad, would govern ineptly. These people have studied the system at a distance and quite clearly know exactly where the weaknesses lie. That is not to say that I support supplanting a person from Diaspora. Not at all.

It is more of yearning for a good, well informed and efficient government, more than anything else.

Where those dons who joined Chiluba's MMD, and later president Levy Mwanawasa and now Rupiah Banda failed to be pro-active, I submit that the new Diaspora blood would do better. They would do things differently – partly because they have come to appreciate how intertwined the globe is.

The major point is – the participatory nine-province Federal system Ntungo is recommending cannot come about by itself. The current, basically UNIP system in place, can be changed if you had enough change agents. It is not written in stone. And because of this possibility that is why of late you have seen a lot of assertiveness from those in the Diaspora. They've recognized that, you cannot wait for somebody else to come and change the system for you. You've to do it yourself. If those at home are satisfied with the status-quo, we aren't.

As President Barrack Obama has repeatedly told us – "our time has come". We have to make an original contribution now. Kenneth Kaunda made his by building the Nation from the scratch even if it meant using 'constraining structure' of government. We have to develop our own destiny by designing strategies to suit our needs.

Impediments or weaknesses such as lack of laws, poor policies or inadequate Constitution should not deter us from moving forward. Since nobody is really stopping us, we must respond with uttermost determination. If lack of decentralization is the obstacle, while it useful to define problems – let's get cracking on finding effective solutions.

I hope that this feedback does not in any way reduce otherwise Chrispin Ntungo's illuminating discussion.

Kaela B Mulenga (Guest Blogger)
Toronto, ON, Canada. e-mail:
zbia@hotmail.com

6 comments:

  1. Hi Kaela,

    Therefore, you have to ask yourself a critical question. Which one do we need most in provinces – a powerful Governor or developed economic infrastructures?

    I agree. There should be a clear vision of decentralisation, with actual economic empowerment for local people in mind. There should be the creation of as many startups as possible, to reduce unemployment and raise incomes (demand).

    Diversifying away from copper, should have meant only one thing – finding and developing other forms of earning foreign exchange.

    Why foreign exchange? For the importation of fuel and capital goods, maybe, but shouldn't we be weening the economy off imported goods? Alternative energies (hydro, solar, biofuels) should replace imported fossile fuels, which are a major drain on the economy, because it is a major part of costs, and all the money spent on it is sent abroad.

    Capital goods have to be imported, but it would be even better if they were manufactured in Zambia itself. Both the impact on lowering cost as well as increasing employment would help the economy. And it would be best of all if they were Zambian owned, at least partially, and without question paid taxes.

    What is really needed, is to uplift worker's incomes, and companies will follow higher wages to provide services for them.

    Moreover we have an army of strong young men and women, who can be put to good use in developing agriculture. Not even to mention that Victoria Falls is one of the wonders of the world. Kenya earns huge bucks from Mt Kilimanjaro which does not even belong to Kenya.

    Agriculture can be the major employer, if it is developed in a way that it gives jobs and owernership to the greatest number of Zambian nationals. If it is left up to the present mindset of attracting foreign companies (euphemistically called 'foreign investors'), then I could see the MMD government trying to attract Japanese or Chilean agribusinesses and give them huge tracts of land.

    These and others are the areas we've failed to jack up. Zambians, with a mining mentality, have failed to seriously imagine the day of reckoning – when copper could be completely exhausted or become obsolete in stroke. With an invention of a new technology to replace copper, we would be forced to eat our own copper. Thus, this discussion raised by Ntungo, is a matter of life and death.

    I would say that the replacement of copper, or the exhaustion mines in Zambia would be decades away, if that. So much of Zambia is yet unexplored, that mineral reserves running out shouldn't really be on our minds.

    What should be on our minds, is that the billions of dollars from mining are channeled into other economic sectors. But because of the power of the mining industry - sometimes it seems a power greater than the government itself - people don't want to talk about high taxes for the mines.

    I fully concur with him when he criticizes the structure – where holding major positions or access to opportunities depends purely on loyalty to the party and president. Not only that this is nepotistic, having leaders incapable of making 'economic decisions', is very bad. Rewarding resources or promotions only to those who can obey cannot be competitive with the rest of the world. We would always be lagging behind and be dependant.

    I completely agree. There is too little legal and budgetary independence on behalf of council leaders, mayors, and it is worsened by the concentration of power in central government and specifically State House.

    Impediments or weaknesses such as lack of laws, poor policies or inadequate Constitution should not deter us from moving forward. Since nobody is really stopping us, we must respond with uttermost determination. If lack of decentralization is the obstacle, while it useful to define problems – let's get cracking on finding effective solutions.

    One way decentralisation would have immediate effect, would be if 50% of national revenues ($550 million in 2004) was handed directly to local councils. Right now, it seems to disappear in Zambia's 29 or so ministries, with little of it trickling down and translating into actual services at a local level.

    Just that amount of money would triple the present budget of most councils. It would even allow them to reduce local taxes and levies. Or attract local businesses and startups with low taxation.

    ReplyDelete
  2. MrK – By and large we are in agreement on many points. But there are certain areas where we completely (or nearly so) have different points. I came to that conclusion after reading your comments to the Minister of Finance. Consider for example your feedback below:

    “Why foreign exchange? For the importation of fuel and capital goods, maybe, but shouldn't we be weening the economy off imported goods? Alternative energies (hydro, solar, biofuels) should replace imported fossile fuels, which are a major drain on the economy, because it is a major part of costs, and all the money spent on it is sent abroad.

    Capital goods have to be imported, but it would be even better if they were manufactured in Zambia itself. Both the impact on lowering cost as well as increasing employment would help the economy. And it would be best of all if they were Zambian owned, at least partially, and without question paid taxes.

    What is really needed, is to uplift worker's incomes, and companies will follow higher wages to provide services for them”.

    By simply decoding those words I have underlined, one can easily have a good impression about your school of thought or at least your preferences. Since you assign a low priority to capital goods, promotion of foreign exchange earnings is likewise in you view, not crucial. Yet for me, I believe that a country has to go through some form of industrialization for it to have a real economic take off. But in industrialization process one needs capital goods.

    Yes, I agree we should not be striving for forex only to support our consumption patterns. Whatever forex we get, the large portion of it should be used for producing goods and services. And not consumption. Zambians’ tooth for luxurious items like SUV’s ought to be curtailed some how.

    But since presently Zambia does not have or produce capital goods, we do not have much choice. We have to import those. It is capital goods which enhances a man’s naked hands to increase productivity and therefore create or increase wealth. When planes came, they were greeted with skepticism and considered dangerous. But yet it was to be a technology which reduced distances and put us closer together. All developed economies have had to use capital equipment to get economic progress. The degree of progress varied depending on management level.

    The point I am making is that – even if you have an abundance of natural resources, assets and plenty of labor, and capable Zambian administrators, you still need to complement these with capital goods. Knitting needles, buttons, and fertilizer – all which can be part of empowering local people have to be manufactured. And before you have bio-fuels, you’ll need fossil-fuels to produce fertilizers. The chain continues.

    Then when you talk of increasing employment and raising workers’ incomes, again for you manufacturing jobs do not feature highly. Your preference is labor-intensive, primarily agricultural jobs. That’s fine, but we would do even better if the-per-unit productivity of these people improved. Their productivity incremental must at least grow (or keep in tack) at the same rate of population growth. Otherwise, this group will fail even to sustain themselves. So it is not just a question of employing masses, but also improving the quality of that labor.

    Only when that happens would you be able to increase your production, which would in turn end up fulfilling your objectives – of selling surpluses or adding value to the raw materials you produce before selling it. As you can see even in the context of meeting self-sufficiency – you cannot jump a step of at least “partial-importation”.

    If I recall correctly, even in your letter to the Minister, you did suggest creation of irrigation works to tap into the available water resources – so as to reduce dependence on rainfall. I would argue that some of these projects require considerable amounts of forex. I agree these rural works would be a good use of forex.

    Again when it comes to even levying the mining investors as much as we can, we are in agreement. It is only when you wonder into romanticism or suggest impractical solutions, that’s when I differ from your view point.

    A case in point is your love for organic agriculture. Yes, for preserving the soil, producing healthier food – this method is superior. In addition, I am also for example against GMOs. But MrK we have to be realistic in terms of current possibilities of being able to feed our populations. Thus, encourage organic farming IF it’s productive capacity is high enough. If not, then you have a case where a limited amount of chemical inputs can get used.

    I currently oppose GMOs for health and environmental risks. But mainly it is because I do not want bio-tech companies to snatch the power of producing food away from the hands of local producers. Once you introduce GMOs, these would end up contaminating our crops maiming everything such that our farmers would be totally incapacitated. That’s what the bio-tech companies are aiming for.- dominancy. Not to alleviate hunger although this is the reason they advance. But if all these issues were to be sorted out, and our people are ready – then GMOs should be admissible. Not now. EU uses similar reasoning.

    Sorry MrK, I had to be lengthy because I know how seriously you take these matters. These are my views.

    KBM
    Mar 2, 2009

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  3. Generally, economic activities that are profitable tend to be able to survive in the long run regardless of sector.

    The capital goods sector is a big one requiring much capital and technical expertise to produce goods that are competitive in price and quality. MFEZ's are a good start in this respect.

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  4. I would say that even for agriculture, you need capital goods (combine harvesters, silos, tractors) and infrastructure.

    I think our biggest point of divergence is that I think we should develop agriculture first. Not only because food might become scarce and food security is also essential to national security and social stability, but because it immoral to have people starving. Add to that the huge inefficiencies that exist in agriculture and agricultural policy today, and that to me is a huge growth market. Some of these inefficiences cost the country foreign exchange - such as the importation of maize. Which I also think is immoral, because it will raise prices elsewhere on the continent.

    Then, there is the tendency of government officials to go for prestige projects, which the attraction of foreign investors itself has become - the politicians are competing with eachother on who can attract the most FDI.

    However the key to real economic growth is to have an effective redistribution of the means by which wealth is produced - land, education, credit - and reinvest both profits and costs within the national or local economy.

    If we import all capital goods instead of looking at producing them, we are also exporting jobs and knowledge, benefiting other economies. So if we attract FDI, let's attract tractor factories, car assembly plants, tool shops, and have at least joint ownership.

    Instead, these politicians keep talking about tourism, and MFEZs with no linkage to the local economy, and no enforcment of a minimum wage or labour and environmental laws.

    We should have policies that aim to create a huge middle class (90% of the workforce or more).

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  5. I have appreciated this exchange very much, and while I would like to focus on just one portion of it in isolation, I by no means intend by omission to imply repudiation or endorsement of one side or the other in this fascinating debate. The area that I am inspired to comment on has to do with sustainable agricultural development, and my personal support for certain approaches to the plight of Zambian rural communities.

    Time and again on this blog, when we have tried to examine solutions for particular problems facing rural communities, transportation costs and irregularities act as a limiting factor on the success of market based approaches to improved household incomes. To a large degree this problem is circular, as higher household income would enable a greater range of options for transport investments both on the individual and community level. Part of the problem posed by the lack of transport resources in Zambia is however a direct result of globalization, which by its very nature uses international competition to place the burden of discrepancies in transportation costs on to producers.

    For consumers in urban transport hubs, where transport resources are concentrated, higher competition forces rural producers to absorb the higher cost of transporting their product to market. For consumers in rural areas, lack of transport resources reduces marketplace competition, enabling producers to pass a higher proportion of transport costs on to the consumer. Thus, any time rural consumers or producers must make use of their scarce transport resources, there is a net wealth transfer out of the community. This is the reasoning which leads me to support many development approaches to Zambian rural development which also happen to qualify by the standards of G8 consumers as organic, which happily also helps to limit the number of international competitors as well as increase the perceived real value of the product in question. The important part is less required transport resources to improve yields, the organic part is bonus as far as I am concerned.

    Production of low volume, high nitrogen fertilizers cannot be scaled down to the individual farm level (its simply too dangerous), increasing the transport requirement. Production of high volume, low nitrogen fertilizers can be scaled down to the individual farm, thus reducing the transport requirement to trace elements and minerals. Improved soil testing will better help to target the latter to increase overall crop health.

    Large scale irrigation, at least in the development stage, requires not only constantly scarce capital resources, but also expenditure of existing transport resources and usually creation of new routes. Somewhat like launching a rocket into orbit, doubling the size of the "payload" in turn requires not only doubling the amount of fuel to lift it, but also adding still more fuel to lift the extra fuel, plus a bit more to lift that extra fuel, and so on. Thus for any particular rocket engine design, there is a theoretical best size and shape of rocket and payload.

    That helps to explain why the price tag on everything done by space agencies is so high, achieving the same result with lower payload requirements translates into a lot of money for design teams to play with. Sometimes this can be taken too far of course, like when NASA spent inordinate amounts of money developing a pen that would still write in zero gravity, and the Soviets responded by equipping cosmonauts with ordinary pencils. With irrigation, it is best to have fairly comprehensive watershed management plans in place before going for large scale, more or less permanent installations. That takes time, resources, and organization.

    In the meantime, investments in single farm scale irrigation options can be profitably undertaken, from low-tech waterwheels and treadle pumps, to high-tech solar pumps and drip systems, to new age adaptations of traditional knowledge such as on-contour ditch-and-swale systems to reduce rainwater runoff. These can later be adapted to interface with the larger watershed management plan, or replaced with relative ease if necessary, if and when a long term strategy is produced.

    Mechanized farming as traditionally practiced in the G8 requires not only massive expenditure for acquisition of specialized equipment, but also the infrastructure to maintain and operate all that equipment. This is where the innovations of organic no-till farmers, who have designed equipment capable of planting a field in a single pass over the ground, are of particular interest for Zambian rural development. It is still mechanized farming, just with a smaller, more efficient machine, which the creators have been kind enough to patent under open source protocols (i.e. free).

    Decreasing the impact of rural agricultural development on the scarce community transport resources by improving yields via on-farm production of inputs and practices which reduce the need for inputs, will in turn enable a greater proportion of new transport development to be devoted to increasing the overall area under cultivation without over-stretching support programmes. The proposed voucher system as well as improved climate for local production and distribution of farm inputs seems like an excellent step which is compatible with more effective "payload delivery" to rural households. Support for agriculture cannot be divorced from the overall rural circumstance, whose greatest bottleneck lies in the transport sector.

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  6. Kaela and Yakima,

    On yield per hectare for organic (manure and vegan) versus chemical fertilizer.

    A case in point is your love for organic agriculture. Yes, for preserving the soil, producing healthier food – this method is superior. In addition, I am also for example against GMOs. But MrK we have to be realistic in terms of current possibilities of being able to feed our populations. Thus, encourage organic farming IF it’s productive capacity is high enough. If not, then you have a case where a limited amount of chemical inputs can get used.

    I have encountered the notion that organic agriculture yields per hectare are smaller, and there is some truth to that. However, I don't think yields are significantly smaller. Here are the results of study comparing conventional (chemical), organic (animal manure) and vegan (legume) fertilisation.

    http://whyfiles.org/shorties/182organic_ag/

    Soybean Yields in kilograms per hectare

    2,546 chemical
    2,461 manure
    2,235 legume meal

    Maize Yields in kilograms per hectare

    6,553 chemical
    6,431 manure
    6,368 legume meal

    Comparing the least effective in terms of yield to chemical fertilizers, that means that the results for maize was 2.9% greater using chemical fertilizer, and a 13.9% difference for soy beans.

    The real change in output in Zambia comes from getting more hectares under cultivation. Subsistence farmers are working 2-3 hectares, while only 20% of arable land is under cultivation. That is the real growth factor we should be looking at - getting more land under cultivation.

    Considering the level of development in the sector, perhaps looking at yield per hectare is just the wrong metric. We should be looking at the yield per farmer or yield per farm instead.

    Yakima,

    I wonder if you are familiar with:

    The American Farm Book, by RL Allen, first published in 1849, and Handy Farm Devices - And how to make them, by Rolfe Cobleigh, first published in 1909.

    They are a fun read, from an era before the use of fossil fuels.

    ReplyDelete

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